Israeli-Palestinian Economic Ties Decline

Author: maarivPosted December 4, 2012

Israeli Finance Minister Yuval Steinitz yesterday [Dec. 2] announced that Israel would withhold tax payments to the Palestinian Authority collected on its behalf in November — a move that is liable to bring down the Abu Mazen [Mahmoud Abbas] government and is a sign of further deterioration in the economic relations between the Palestinian Authority and Israel following the dramatic resolution by the UN General Assembly to recognize Palestine as a non-member observer state.

Summary⎙ Print Israeli-Palestinian economic ties have deteriorated and are unlikely to improve given the political climate, writes Danny Rubinstein.

In recent years, an economic struggle worthy of note, which may be labeled “a Palestinian endeavor for diminished economic dependence on Israel,” has been evolving concurrently with the Palestinian political campaign. This trend is distinctly reflected in the statistical data concerning the trade between Israel and the Palestinians — which declined in the past two years by about 10%. Palestinian Authority spokesmen in Ramallah stress that they are seeking to expand and diversify the range of sources for their imports, which currently draw primarily on the Israeli market. At the same time, they are making efforts to find new markets for the Palestinian exports, mainly in the Arab world.

No choice but to buy from Israel

According to data released by the Palestinian Bureau of Statistics, Palestinian imports from Israel accounted for 73% of the overall Palestinian imports in 2010, while by the end of 2011, the imports from Israel dropped to only 65%. In other words, the Palestinians are buying less from us [Israel] than they used to in the past. The question is: Why? It emerges from various Palestinian publications that it is assessed that the Israeli market benefits from the trade with the Palestinians, who are, in fact, a captive consumer market, where they have no choice but to buy Israeli products or through Israeli importers. Add to this the Palestinian government official actions, under which purchases from Israeli plants operating across the Green Line are banned by law, and the activity of Palestinian organizations calling for the boycott of Israeli products that can be substituted by Palestinian products and the picture becomes clear.

Israelis, too, are buying less from the Palestinians.

While Palestinian imports from Israel are on the decline, imports to the Palestinian Authority from other countries are naturally growing, with Turkey in the lead. Before 2005, Palestinian imports from Turkey amounted to some $10 million annually, whereas in 2010 the figure soared to $180 million and it is estimated that in the past two years, the scope of imports from Turkey totaled $250 million per year. Yet, these figures should be viewed in context. Thus, in 2010 the Palestinians bought from Israel goods worth $2.85 billion — hundreds of percentage points more than their imports from Turkey or China, which is second on the list of foreign exporters to the Palestinian Authority.

Thus, under the current circumstances, the trade relations between the Palestinian Authority and Turkey are unlikely to come in place of the Palestinian Authority’s trade relations with Israel.

All the same, there can be no mistake about it — the trade relations between the Palestinian Authority and Turkey are tightening. Agreements facilitating trade between Turkey and the Palestinian Authority have been signed; Turkish banks are conducting negotiations with the Palestinians on the opening of branches in the Palestinian territories; Turkey has complied with the Palestinian Authority’s request to boycott Israeli products made in the territories and in spite of the obstacles, the efforts for the establishment of a Turkish-financed industrial zone near Jenin are carried on.

The Israelis have not only been selling less and less to the Palestinians recently, but also buying less from the Palestinians. This may be attributed, in part, to the economic slowdown in Israel, mainly in the Israeli construction sector, which customarily relies on imports of raw materials from the West Bank quarries.

The political campaign conducted by the Palestinian Authority against Israel is thus tied in with its diminishing trade relations with Israel — a trend that, for the time being, is still rather limited.

Al-Monitor brings together top journalists from across the Middle East. Including Egypt, Iran, Iraq, Israel, Lebanon, Palestine, Syria and Turkey. Plus, we have daily translations from 20 major news organizations in the region.